Seamless and hassle-free, Kotak Securities allow you to invest in different NCDs across tenors. The Website reserves the right to discontinue or suspend, temporarily or permanently, the facilities. You agree that the Facilities Provider/ ABC Companies will not be liable to you in any manner whatsoever for any modification or discontinuance of the facilities. We may suspend the operation of this Website for support or maintenance work, in order to update the content or for any other reason.

The reputation of the company is the key factor to be considered while investing in NCDs. Investors should invest in AAA-rated companies to ensure that they get their due returns in the form of interest payouts as well as redemption value without any high risk of default. While NCDs do not have the option to be converted into equity shares, there are several other features that make it a sound investment. Check their asset allocation, debt-equity ratio, and other financial aspects before investing. There are two ways through which people who have invested in NCDs can earn a return rate.

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Certified and professional credit rating agencies assign ratings to NCDs, helping the investors independently assess the issuer’s creditworthiness. The risk and reward from NCDs are proportional as the interest rates are lower for NCDs with better ratings. Non-secured non-convertible debentures do not have any underlying collateral. Hence, it tends to be high-risk and offers attractive interest rates.

Debt Ratio

Typically, the interest rate ranges from seven to nine percentage points per annum. The Non-convertible Debentures interest rate is higher than on FDs, making them an attractive investment option. The interest can be paid monthly, quarterly, annually, or cumulative and on principal maturity amount. Individual investors will have to pay taxes at the same rate per the income tax slab if they sell their NCDs before a year has passed. Tax on any gain realised by selling NCDs after one year will be charged at a rate of 10% if indexation is not applied or 20% in case of indexation.

Yes, NCDs are listed on stock exchanges and can be traded in the secondary market. Like any financial instrument, NCDs come with their own set of risks, despite offering steady returns. There are primarily two types of Non-Convertible Debentures that investors can choose from, depending on their risk appetite and investment horizon.

• The investor can choose the interest frequency and plan for cashflows.
• The investors should make such investigations as it deems necessary to arrive at an independent evaluation of use of the trading platforms mentioned herein.
• Some background check on the asset quality of the company can go a long way for NCD investors.

Non-Convertible Debentures 101: A Complete Guide To NCD Investment

However, investors should conduct thorough research before investing in NCDs. They should prior evaluate the issuer’s creditworthiness, compare interest rates and credit ratings, and understand the liquidity and exit options. Investors should also consider the tax implications of investing in NCDs and seek professional advice before making an investment decision.

These links are provided only as a convenience, in order to help you find relevant websites, facilities and/or products that may be of interest to you, quickly and easily. It is your responsibility to decide whether any facilities and/or products available through any of these websites are suitable for your purposes. You are advised to consult an investment advisor in case you would like to undertake financial planning and / or investment advice for meeting your investment requirements. A healthy company should be able to provide for at least 50% of its potential NPAs. This ensures that the company is generating enough returns to meet its obligations and mitigate the risk of the investors.

Steps to Purchase NCDs:

Join the community of 4 lakh + investors and learn more about Grip, the latest financial knick-knacks and shenanigans that take place in the world of investing. Higher potential earnings, especially for unsecured options, reflecting non convertible debentures meaning added risk. Generally low-risk, but credit risk depends on the financial stability of the issuing entity. Mutual Fund, Mutual Fund-SIP are not Exchange traded products, and the Member is just acting as distributor. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism.

Incorporating NCDs into a diversified investment portfolio can help balance risk and enhance potential returns. By conducting thorough research and due diligence, you make informed decisions regarding NCD investments and align them with your financial goals. These Terms of Use and any notices or other communications regarding the Facilities may be provided to you electronically, and you agree to receive communications from the Website in electronic form. Electronic communications may be posted on the Website and/or delivered to your registered email address, mobile phones etc either by Facilities Provider or ABC Companies with whom the services are availed.

• Lastly, in case of liquidation, the company prioritises payment to convertible debenture holders over equity shareholders.
• Non-convertible debentures (NCDs) are fixed-income instruments that are usually issued by high-rated companies in the form of a public issue to accumulate long-term capital appreciation.
• There are two ways through which people who have invested in NCDs can earn a return rate.
• Having these securities readily tradable provides both liquidity and flexibility in portfolio planning.

Secured Non-Convertible DebenturesThese are protected by the company’s assets, which act as collateral. If the company defaults, holders of these instruments have a legal claim on the pledged assets. With distinct characteristics that shine in the fixed-income avenue, they offer more than just predictable returns. These debt securities present unique advantages that can not be overlooked.

NCDs are vulnerable to risks related to handling business and funding. Hence, the credit rating can take a hit if the turnover is negatively impacted. The company will have to borrow additional funds from banks or NBFCs to counterbalance the impact.

However, there would be a TDS incidence if the yearly interest surpasses INR 5,000 in any given fiscal year. Investors who purchase NCDs typically enjoy regular interest payments at a fixed rate over the term of the Debenture. This makes NCDs an appealing investment choice for investors seeking predictable returns.

• Secured NCDs:

A higher ICR indicates that the company is better equipped to service its debt obligations. Therefore, it is important to check the ICR of the issuing company before investing in its NCDs. NCDs are backed by the creditworthiness of the issuer and are not backed by any collateral. Interest pay-outs are either monthly, quarterly, half-yearly, or annually.